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Will Rupert Murdoch Lead Way for Paid Online Content?

You could almost hear the sighs of relief in the hushed, thickly carpeted corridors of high-powered media executives on Aug. 6, when News Corp. chairman and managing director Rupert Murdoch announced that he was going to start charging for online news content by July 2010. At last, they exulted, somebody was jumping in and demanding that consumers pay for a product that has been given away for nothing on the Web. And even better, that somebody was not them.

“Quality journalism is not cheap, and an industry that gives away its content is simply cannibalizing its ability to produce good reporting,” Murdoch said during a call with analysts and reporters. The Wall Street Journal, which he owns, is one of the very few news operations to charge users to see its content online. Now he wants to put all his sites  News Corp. is the biggest producer of news in the English-speaking world  behind a pay wall. That includes the online output of papers that run the spectrum of quality all the way from the snobby Times of London to the grubby New York Post, not to mention broadcaster Fox News Channel .

In making the announcement, Murdoch was butting into a long-running debate that has risen several decibels since the recession hit and blew out most of the advertising that the news industry relies on. As newspaper after magazine folds or seeks a buyer, pro-payment advocates are affirming ever more urgently that content is expensive to produce and they can’t afford to keep giving it away on the Web. The free agents counter that Web publishing is based on getting traffic  the so-called link economy  and pay walls stop that dead. Customers also claim they won’t pay.

So is Murdoch’s declaration a classic, bold Rupertian move or the action of a desperate man The mogul is 79 years old. His love affair with newspapers has lasted longer than his three marriages. But now it’s an open question as to who will cease to exist first: Rupert or the newspaper as we know it. He has made it clear that he wants one of his children  probably James  to run the show after he exits. This partly explains why he and his loyal and capable No. 2, Peter Chernin, recently parted company. But none of his children loves newspapers the way he does.

Despite the fact that, in Web time, July 2010 is an eternity from now, Murdoch clearly felt the need to do something quick. He made the announcement while discussing News Corp.’s dire year-end results: his empire took a stinging $203 million loss in the fourth quarter, and operating income was down 30% for the year. All in all, the company swung from a $5.34 billion profit the year before to a $3.38 billion loss in the fiscal year that just ended. Murdoch cares little for Wall Street, but he knows his investors need to have confidence that he’s on his game. The switch to a pay model smacks of virility and aggression, the Murdoch of yore. “If we’re successful,” he said, “we’ll be followed fast by other media.”

Or so he hopes. One of the few growth areas among News Corp.’s crops were the Fox cable channels, particularly FNC, which showed a 50% rise in operating income. FNC’s head, Roger Ailes, with whom Murdoch has clashed before, is likely to oppose any switch to an online fee model. It would be commercial suicide for FoxNews.com to charge for content until CNN.com and MSNBC.com do. And even if  and it’s a big if  most major news websites were to follow Fox’s lead, the BBC wouldn’t, because it’s not supposed to make money.

Murdoch’s conundrum remains that his advertising-driven properties  news and broadcast TV  are in the dunny, as the Australian media baron might say, while the pay-for-content properties  movies and cable  are holding steady or growing. So why not, he figures, get paid for all the content
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